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Vietnam’s aviation market is forecast to be the world’s 7th fastest-growing in the 2013-2017 period, with annual growth rates of 6.9 percent and 6.6 percent expected for international passengers and freight, respectively, according to the International Air Transport Association (IATA).

These statistics were shared by Tony Tyler, general director of IATA, at a workshop co-organized by the association and national flag carrier Vietnam Airlines in Hanoi on Wednesday.

“Vietnam is a dynamic and rapidly growing aviation market. The successful development of aviation will pay big dividends to the Vietnamese economy,” Tyler said in his keynote address at the event.

“It must be treated as a strategic asset and handled correctly,” Tyler added.

According to Tyler, aviation currently contributes US$6 billion to Vietnam’s GDP and supports over 230,000 jobs. Between 2008 and 2013, Vietnam’s passenger traffic grew by 96 percent, he said.

Challenges to be addressed

However, to maintain a high growth rate, the IATA recommended that the Vietnamese government work with the air transport sector to improve three broad strategic areas, including infrastructure, passenger experience, and cargo.

Infrastructure is a critical component of the air transport sector that needs improvement, as Vietnam ranks 82nd in the Infrastructure Index of the World Economic Forum’s Global Competitiveness Report, he said.

Among the ten ASEAN states, Vietnam ranks sixth, Tyler said, adding that the country is addressing these low rankings with significant investments, including the announcement of an aviation master plan to have 26 airports by 2020.

Expansion programs are underway at the Hanoi and Ho Chi Minh City airports, with the new Long Thanh International Airport expected to be ready in the southern province of Dong Nai by 2020, he said.

While encouraged by the positive steps taken by Vietnam to improve its infrastructure, the IATA urged that careful planning and industry consultation are needed to form a well-shaped legal framework in advance of any change to the current structure and ownership of the Southeast Asian nation’s airports.

Vietnam has hinted at plans to open its airports to foreign investment and management, and to equitize the state-owned Airports Corporation of Vietnam.

“While airport privatization can provide access to the capital needed for infrastructure programs, we have seen enough spectacular examples of unintended negative consequences to urge caution,” Tyler said.

“To balance the market power of privatized airports, Vietnam needs to establish an effective independent economic regulator that is in line with well-established international norms. That should bring about fair charging schemes aligned with International Civil Aviation Organization (ICAO) policies,” he said.

“Lower charges will also improve the viability of routes and allow Vietnam to reap the benefits from enhanced connectivity and increased traffic,” he added.

Regarding passenger experience, the IATA executive said the implementation of the association’s Fast Travel program and the easing of visa requirements will improve the passenger experience in Vietnam.

Therefore, the country should make it a priority to implement the six Fast Travel initiatives covering check-in, self-tagging of baggage, document checks, flight rebooking, self-boarding, and bag recovery.

“Passengers have told us through the IATA Global Passenger Survey that they want to be able to do more things themselves. As Vietnam develops its airport infrastructure, it has the opportunity to build them around the self-service expectations of travelers,” said Tyler.

Easing of visa requirements recommended

A review of the visa requirements to enter Vietnam should also be implemented, he said, adding that every tourist who decides to have a holiday in a neighboring country because of Vietnam’s visa process is a lost economic opportunity, so easing visa requirements can boost tourism.

In the Henley & Partners index of visa restrictions, Vietnam ranks 81st, because only 47 nationalities are not required to obtain a visa before entering the country. This ranking does not compare well to other regional states such as Singapore (5th), Malaysia (8th), and Hong Kong (15th).

“Your competitors, on the other hand, rank much higher: Singapore is fifth, with visa-free entry for 170 nationalities; Malaysia is in eighth place by granting visa-free access to 166 countries; and Hong Kong is 15th, with visa-free access for 156 nationalities.”

Freight services were also discussed at the Hanoi workshop. For the development of cargo movement, which represents 25 percent of Vietnam’s trade by value, or $29 billion, e-freight will help to improve the efficiency of the country’s air cargo industry.

“A key step to implementing e-freight is the adoption of the e-Air Waybill (e-AWB). While Vietnam Airlines has been able to use e-AWB for domestic freight, it is unable to do so internationally, as Vietnam has yet to ratify the Montreal Convention 99 (MC99),” the IATA said.

“I urge Vietnam to ratify MC99 quickly so that greater efficiencies can be achieved in Vietnam’s air cargo sector,” Tyler added.

MC99 provides the legal framework for the use of electronic documents of carriage, paving the way for freight forwarders and airlines to use the e-AWB.